Assignment Task

Case Study

You are a specialist in WTO Law. You have been consulted by Mr James Cornell, the in-house counsel of Apco Ltd an English company specialising in chestnut purée for babies. It also produces Babypounce, a mango fruit syrup that is very similar to mango liquor. Apco Ltd currently sells only in the UK but has been so successful, especially with Babypounce, that it has decided to extend its activities overseas. It needs however to build a new plant as its capacities are already very close to the maximum. In order to reduce costs, it has decided to build the plant in the north of England. This area is characterised by a high unemployment rate and persistent social problems, and therefore receives aid from various bodies.

In order to build its factory in the north of England, Apco Ltd needs to get a financial contribution from two organisations. One is funded by the city council in the north of England and the other one is a charitable organization (raising money from donations from expatriates). As a result of personal connections in government Apco also expects to arrange a loan with a well-known English bank at the favourable rate granted to the State.

M. Cornell is happy with these arrangements as at the end of the day, Apco Ltd will be able to build a new plant and therefore export its successful products. However, one of the company`s main target areas, a State named X, has now become aware of the existence of the subsidies that Apco Ltd will receive. It therefore decides to prohibit all importation of Babypounce and Chestnut purée for seven years, despite the risk of local riots (babies need their Babypounce). The decision was taken by the government of X one week after being made aware of the potential subsidies to Apco.